Fire today ravaged the Cutty Sark, causing extensive damage to the world's last remaining tea clipper and one of Britain's most important maritime treasures.

Residents in Greenwich, south-east London, where the 19th century ship has been in dry dock since the 1950s, described hearing an explosion at around 4.45am.

Firefighters arrived to find a "substantial" blaze had engulfed the timber and iron hulled ship, which has been undergoing a £25m renovation.

Police said they were examining whether arson was the cause of the fire and appealed for witnesses.

Despite the apparent damage, experts overseeing the broad restoration project on the 138-year-old ship said an initial inspection indicated a section of its structure remained intact and it could perhaps be restored.

"Initial indications are that this is not an insurmountable problem," Ian Bell, the technical manager of the Cutty Sark Trust, told reporters after being allowed to inspect the vessel.

He said parts were "completely unaffected" and his biggest fears were for the condition of the iron braces that held the ship together.

"There is some localised distortion, but not major distortion [of the metal]," he said. "It is not as bad as it could have been."

More than half of the ship's structure, including the three 100-ft (33-metre) masts and 250 teak planks, had already been removed as part of the restoration work. Much of the damage was to a temporary wooden roof installed to provide cover for the 65 carpenters, shipwrights, fabricators and other conservationists currently working on the project.

Initial inspections suggested the ship's distinctive bow and stern appeared to have survived the worst of the blaze. The figurehead, Nanny, was also safe in a temporary exhibition centre neighbouring the clipper.

Police said they were treating the ship fire as suspicious - a routine procedure - and CCTV images were being examined. A night security guard had been interviewed by detectives, and officers were trying to trace a silver car seen near the scene.

At a press conference this afternoon, the Met's Superintendent Mark Mitchell said a joint investigation by the London Fire Brigade and the Forensic Science Service was under way. Dogs from the police arson investigation unit were taken on to the site this afternoon.

Chris Livett, chairman of Cutty Sark Enterprises, said the ship was "the heart of Greenwich" and it would be "unbelievable" to think anyone would want to destroy it.

He was unable to put a figure on how much the blaze would cost but Richard Doughty, the chief executive of the Cutty Sark Trust, said the delay would cost £10,000 a day.

The Cutty Sark was "the Ferrari of her day because she was the epitome of speed under sail" inspiring countless yachtsmen and -women, he said.

"This is a ship that helped to make the wealth of London. She travelled the world, she belongs to the world. She is the first ship anywhere that was conserved for the nation."

"One thing is certain: we will now redouble our efforts to save the world 's most famous clipper ship. It has been rescued twice before, in 1922 and 1953; this will be third time lucky."

Asked whether he thought the fire was suspicious, Mr Doughty replied: "I find it hard to believe that anything we've done could have set the ship alight. There isn't anything electrical at the heart of where the fire started. I can't think of anything there apart from wood and metal."

The culture secretary, Tessa Jowell, said she was "horrified" to learn of the fire and hoped the ship could be restored.

"The Cutty Sark is an icon of our heritage and a world-famous landmark known by millions," said Ms Jowell, who is expected visit the scene later today. "I very much hope the Cutty Sark can be restored, so it can take its place once again as one of London's - and the world's - great sights."

Maureen Taylor, whose home adjoins the Cutty Sark site, said she was woken by a "loud bang".

"As soon as I looked out of the window I saw flames, and they were high already," she said, adding that she then got her 11-year-old daughter and the family's dogs outside and across the road. "There was ash everywhere in the sky," she said.

The battle to bring the blaze under control was delayed for 45 minutes after fire crews found gas cylinders near the ship and were forced to evacuate nearby residents and make sure no other cylinders were onboard.

While some water was directed on to the fire during this period, it was only a "defensive" response, with the "aggressive" firefighting delayed until the area was deemed safe, Ian Allchin, a London Fire Brigade spokesman, said.

By 6.20am the fire was under control but had left the ship a smoking, blackened wreck, framed by the exposed spars of a temporary roof erected above it during the restoration project.

The Cutty Sark has been closed to the public since November 2006 for a £25m renovation and was due to reopen in 2009. The ship needed substantial repairs because sea salt had speeded up the corrosion of its iron framework.

Nick Raynsford, MP for Greenwich and Woolwich, who visited the Cutty Sark last week, said the fire was a "terrible blow".

"This is the most famous ship in the world and it draws millions of visitors. People from all over the world will be devastated by this news."

The Cutty Sark left London on its first voyage on February 16 1870, sailing around the Cape of Good Hope to Shanghai three months later. But the ship made only eight voyages to China in the tea trade.

The opening of the Suez canal, just after the Cutty Sark was built, quickly made tea clippers redundant as steamers benefited from a shorter sea route. The ship was the world's only surviving example of an "extreme clipper", regarded as the ultimate development of a merchant sail vessel.

Most of the original hull had survived since the ship was built. One of London's top tourist sites, the Cutty Sark has attracted 15 million visitors since it opened in 1957.